Treasuries Extend Sell-Off Following Upbeat Jobs Data

2/2/2018 3:20 PM ET

Extending a recent downward trend, treasuries moved sharply lower over the course of the trading session on Friday.

Bond prices came under pressure early in the session and remained firmly negative throughout the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped by 8.1 basis points to 2.854 percent.

The ten-year yield extended the strong upward move seen in the previous session to reach its highest closing level in four years.

The continued sell-off by treasuries came following the release of a Labor Department report showing stronger than expected job growth and a jump in wages.

The report said non-farm payroll employment surged up by 200,000 jobs in January after climbing by an upwardly revised 160,000 jobs in December.

Economists had expected employment to increase by about 180,000 jobs compared to the addition of 148,000 jobs originally reported for the previous month.

The Labor Department said the unemployment rate came in at 4.1 percent in January, unchanged from the three previous months and in line with economist estimates.

Meanwhile, the annual rate of growth in average hourly employee earnings accelerated to 2.9 percent in January from an upwardly revised 2.7 percent in December.

"Given companies such as WalMart have credited Trump's tax cuts as a way for them to afford higher worker pay we suspect we will see the wage numbers pick-up further," said James Knightley, Chief International Economist at ING.

He added, "Consequently, it will need a big shock to prevent the Fed from hiking in March, but it could happen in the form of a damaging government shutdown should politicians fail to resolve their differences."

Separately, revised data released by the University of Michigan showed only a slight deterioration in consumer sentiment in the month of January.

The report said the consumer sentiment index for January was upwardly revised to 95.7 from the preliminary reading of 94.4. Economists had expected the index to be upwardly revised to 95.0.

With the bigger than expected upward revision, the consumer sentiment index is just below the final December reading of 95.9.

The economic calendar for next week is relatively light, although traders are likely to keep an eye on reports on service sector activity and international trade.

Bond traders are also likely to keep an eye on the results of the Treasury Department's auctions of three-year and ten-year notes and thirty-year bonds.

The Treasury said it plans to sell $26 billion worth of three-year notes next Tuesday, $24 billion worth of ten-year notes next Wednesday and $16 billion worth of thirty-year bonds next Thursday.